The theory of computation is the branch of computer science that deals with whether and how efficiently problems can be solved on a model of computation, using an algorithm. The field is divided into two major branches: computability theory and complexity theory, but both branches deal with formal models of computation.
In order to perform a rigorous study of computation, computer scientists work with a mathematical abstraction of computers called a model of computation. There are several models in use, but the most commonly examined is the Turing machine. A Turing machine can be thought of as a desktop PC with a potentially infinite memory capacity, though it can only access this memory in small discrete chunks. Computer scientists study the Turing machine because it is simple to formulate, can be analyzed and used to prove results, and because it represents what many consider the most powerful possible "reasonable" model of computation. It might seem that the potentially infinite memory capacity is an unrealizable attribute, but any decidable problem solved by a Turing machine will always require only a finite amount of memory. So in principle, any problem that can be solved (decided) by a Turing machine can be solved by a computer that has a bounded amount of memory.
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Computability theory deals primarily with the question of whether a problem is solvable at all on a computer. The statement that the halting problem cannot be solved by a Turing machine is one of the most important results in computability theory, as it is an example of a concrete problem that is both easy to formulate and impossible to solve using a Turing machine. Much of computability theory builds on the halting problem result.
The next important step in computability theory was the Rice's theorem, which states that for all non-trivial properties of partial functions, it is undecidable whether a Turing machine computes a partial function with that property.
Computability theory is closely related to the branch of mathematical logic called recursion theory, which removes the restriction of studying only models of computation which are close to physically realizable. Many mathematicians and Computational theorists who study recursion theory will refer to it as computability theory. There is no real difference between the fields other than whether a researcher working in this area has his or her office in the computer science or mathematics field.
Complexity theory considers not only whether a problem can be solved at all on a computer, but also how efficiently the problem can be solved. Two major aspects are considered: time complexity and space complexity, which are respectively how many steps does it take to perform a computation, and how much memory is required to perform that computation.
In order to analyze how much time and space a given algorithm requires, computer scientists express the time or space required to solve the problem as a function of the size of the input problem. For example, finding a particular number in a long list of numbers becomes harder as the list of numbers grows larger. If we say there are numbers in the list, then if the list is not sorted or indexed in any way we may have to look at every number in order to find the number we're seeking. We thus say that in order to solve this problem, the computer needs to perform a number of steps that grows linearly in the size of the problem.
To simplify this problem, computer scientists have adopted Big O notation, which allows functions to be compared in a way that ensures that particular aspects of a machine's construction do not need to be considered, but rather only the asymptotic behavior as problems become large. So in our previous example we might say that the problem requires steps to solve.
Perhaps the most important open problem in all of computer science is the question of whether a certain broad class of problems denoted NP can be solved efficiently. This is discussed further at Complexity classes P and NP.
Aside from a Turing machine, other equivalent (See: Church-Turing thesis) models of computation are in use.
In addition to the general computational models, some simpler computational models are useful for special, restricted applications. Regular expressions, for example, specify string patterns in many contexts, from office productivity software to programming languages. Another formalism mathematically equivalent to regular expressions, Finite automata are used in circuit design and in some kinds of problem-solving. Context-free grammars specify programming language syntax. Non-deterministic pushdown automata are another formalism equivalent to context-free grammars. Primitive recursive functions are a defined subclass of the recursive functions.
Different models of computation have the ability to do different tasks. One way to measure the power of a computational model is to study the class of formal languages that the model can generate; in such a way to the Chomsky hierarchy of languages is obtained.